The EU is deadlocked over its proposed $860 billion coronavirus rescue package, as a group of frugal nations stall talks

Reuters

• The European Union’s top leaders remain deadlocked over the size and scope of a proposed rescue deal for the bloc as it responds to the COVID-19 downturn.
• An originally proposed 750 billion euro ($860 billion) plan has failed to kick off as leaders continue to debate components of the fund.
• The fund was reportedly meant to include 500 billion euros in grants and 250 euros billion in loans.
• However, the amount of money given in grants has been a major stumbling block, with a group of frugal nations pushing to drastically lower that number.
• Talks are entering a fourth day Monday, with leaders set to agree a proposal for 390 billion in grants.
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The European Union’s top leaders remain deadlocked over the size and scope of a proposed rescue deal for the bloc as it responds to the COVID-19 downturn.

A European Unit summit meant to debate a common recovery fund took place over the weekend, but discussions have been extended to continue Monday.

A 750 billion euros ($859 billion) fund was originally proposed as part of the EU’s seven-year budget aimed at economic and social recovery from COVID-19.

The original proposal included a combination of 500 billion euros in grants and 250 billion euros to be distributed in loans, the EU said at the time it was launched in May.

The proposal was almost immediately shot down as the Netherlands, Austria, Sweden, and Denmark reportedly expressed concerns over the €500 billion amount of grants, preferring a larger proportion of loans as part of the package.

Over the weekend, the group, known sometimes as the “Frugal Four,” suggested dishing out a maximum of 375 billion euros in grants instead, while nations like Spain – which is one of the worst hit by the virus – argue that grants must be a minimum of 400 billion euros, the BBC reported.

Belgium’s Charles Michel, president of the European Council, proposed a compromise of 390 billion euros in grants, the Financial Times reported. Leaders will discuss that proposal later Monday, the newspaper added.

Concerns have also emerged around whether funds will be used only to tackle the COVID-19 crisis.

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However, analysts at Rabobank say the amount is “out of scale” with what is being spent elsewhere.

“As ever with Europe, one team, one dream, becomes a deadlock holiday whenever the subject of jointly issued debt, or fiscal transfers between the countries of the block come up,” said Jeffrey Halley, a senior market analyst at OANDA.

Germany and France reportedly left the negotiations early on – a sign that things weren’t going well.

“The EU’s weak underbelly has always been its inability to respond quickly to urgent situations and fiscally work together, leaving the ECB to paper over the cracks,” Halley said.

Progress among EU leaders helped the euro rise to a 4-month high as the currency gained 0.3% against the dollar to trade at $1.15 on Monday.

Discussions are scheduled to commence later on Monday afternoon.

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